The chances, you already know what a HMO is – but if you don’t, it stands for ‘House of Multiple Occupation’. Simply put, it is a property that is divided up into rooms which are independently let.
You roughly have three target markets – Students, Working professionals and Benefit Claimants. It is important to establish which type of HMO you are looking to create because the three types do not mix well and also quite often have different requirements.
Working people will normally want an en-suite or to share a bathroom with no more than one other person. This works well because when 3 or more people share, somebody gets a little lazy and accountability is hard to pin down as there could be at least two other parties who aren’t cleaning up after themselves.
As this type of tenant is working and normally leaving for work every day, it is important to make sure there are a good number of en-suites or communal shower-rooms available as they may be leaving for work at similar times and nothing is more frustrating than having to wait 15-20 minutes for someone else to finish using the shower you need to get into.
They’ll also likely not make so much noise in the property as they need their sleep for work and so on the whole, are more respectful of peacetime hours. There are exceptions where people may work night shifts but in general, I have found most tenants who do so are considerate of the others and do not slam doors at early hours of the morning because they’ll value the same respect in return from the other housemates during the day while they are sleeping.
Students were well-known for having to put up with poor living conditions and landlords used to have an unreasonable amount of control over providing poor living standards with cramped conditions. But expectations have increased substantially now, especially from the foreign student market. They mostly want a hotel / co-living experience, with en-suites, large shared kitchen facilities, communal spaces and room or dedicated space to study. Obviously, cost considerations do come into play as students have a limited budget but I have found that many – especially foreign students – will pay for the best available rooms as they will be spending more time in them than people who go out to work 5-6 days a week.
Benefit Claimants clearly have the toughest budgets to contend with and over the years, have become less desirable as a tenant type. This is due to the rent amounts available to them being unrealistically low for the market, requiring top-ups and straining a claimants finances even further. Add to this the fact that councils gave tenants the option of receiving the rents directly as opposed to paying directly to landlords, on top of a hugely disastrous move to Universal Credit leaving tenants without any payments for months in many cases and you can see why landlords now often steer clear of this tenant type.
There are unfortunately other issues too. Benefit Claimants will likely spend much more time in the house which increases utility bills and damage and wear to the property. This also means more time ‘under each others feet’ and this can lead to tensions between housemates. This is particularly exacerbated if one has a drinking or drugs problem and can often lead to every other tenant moving out if swift action isn’t taken against the offending housemate. And if that should result in an eviction then the landlord is in a nightmare scenario if they try to evict using a Section 21 because the tenant will often be told by the council not to leave. If they do, they will make themselves intentionally homeless and will not be re-housed so given that as an option, what is a tenant to do?
There are some advantages to this type of tenant though as they tend to stay much longer in the properties. Older persons in this category tend to be really good tenants too as they’re more respectful of the property and others and don’t make noise or encourage lots of friends to come round. So if you can find a way to deliver a HMO within this budget range and you select wisely, you can benefit from a stable income unaffected by unemployment or pandemics and be fairly sure that you are less likely to have a regular churn of tenants. All three markets can be lucrative – the key is to make sure that the property reflects what your target tenant type is looking for.
And above all else, remember this – tenants are your customers. If you want to keep your customers, look after them!